Healthcare Real Estate Heating Up

The acquisition of medical office buildings (MOB) is increasing in the country. Recently, real estate trust Griffin-American Healthcare REIT II, Inc. announced the acquisition of close to 20 medical office buildings for approximately $103 million. This adds to the already existing 110 buildings currently owned by the American Healthcare Investors and Griffin-American Healthcare REIT II.

Grosvenor Americas acquired a 120,000 square-foot medical office building earlier this month in the Merrifield area of Fairfax for $43 million.

These transactions come on the heels of a report stating that the demand for medical office buildings is slowly heating up in the country. The recent edition of the Heathcare Real Estate Insight points out that with an increasing number of MOBs sold in previous months, the market seems to be on a rebound.

Data provided by the Real Capital Analytics (RCA) shows that a total of 183 properties were sold in the second quarter of 2012, accounting for more than $1.63 billion, HREI reported. The most expensive sale in this quarter was the former Patients First building in Washington for $53 million.

“That is the highest quarterly sales level recorded since the fourth quarter of 2010 and the fourth highest ever – at least since RCA began tracking MOBs sales in the first quarter of 2001,” HREI editor John B Mugford said in a statement. “Even during the MOB sales heyday of 2006-08, only two quarters saw greater sales volume than was recorded last quarter. Q2 was the third consecutive quarter during which MOBs sales topped $1 billion, and that hasn’t happened since Q4 2007 and the first two quarters of 2008. So the recent increase in MOB sales activity certainly suggests that healthcare real estate investment and development have picked up steam.”

Mugford predicts that the rebound is set to continue with various other large transactions set to complete before Sept 30.

“That could make Q3 another high-volume quarter for MOB sales,” he said.

Late last year Jones Lang LaSalle had released its Healthcare Real Estate Outlook projecting a favorable year for the healthcare real estate industry, especially for the MOB market.

"Medical office buildings have never been an explosive asset class," Shawn Janus, managing director of Jones Lang LaSalle's health development programs in Chicago had told American Medical News. "They have been a much more stable investment with a predictable yield, but [health reform] has made them much more attractive now. There's a lot of capital chasing that asset class.”